Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/125113
Authors: 
Gresnigt, Francine
Kole, Erik
Franses, Philip Hans
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper 15-118/III
Abstract: 
We develop Hawkes models in which events are triggered through self as well as cross-excitation. We examine whether incorporating cross-excitation improves the forecasts of extremes in asset returns compared to only self-excitation. The models are applied to US stocks, bonds and dollar exchange rates. In-sample, a Lagrange Multiplier test indicates the existence of cross-excitation for these series. Out-of-sample, we find that the models that include spillover effects forecast crashes and the Value-at-Risk significantly more accurately than the models without.
Subjects: 
Hawkes processes
extremal dependence
Value-at-Risk
financial crashes
spillover
JEL: 
G01
G17
Document Type: 
Working Paper

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